Pagoda Blog

BlackBerry To Go Private Under $4.7 Billion Deal With Fairfax

BlackBerry announced Monday it has agreed to a letter of intent led by Fairfax Financial Holdings that would take the ailing smartphone company private for $4.7 billion.

Toronto-based Fairfax already owns a 10 percent stake in the company. Also involved in the consortium are Merrill Lynch and BMO Capital Markets. The transaction has already been approved by BlackBerry's board of directors and will be completed Nov. 4 if there are no other offers.

"We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees. We can deliver immediate value to shareholders, while we continue the execution of a long-term strategy in a private company with a focus on delivering superior and secure enterprise solutions to BlackBerry customers around the world," said Fairfax Chairman and CEO Prem Watsa in a prepared statement.

The news comes just three days after the company announced disappointing preliminary fiscal second-quarter earnings, revealing close to $1 billion in losses and announcing it would layoff 4,500 employees. The company also had a tough weekend after abotched BBM application rollout.

The deal amounts to $9 per share for the ailing smartphone company, which is a bargain, said Jeff Kagan, an independent technology analyst.

"The price is a bargain, but then again BlackBerry has been crashing and burning for a couple of years," Kagan said. "This is a distressed sale. I don't know what the real value is, but as far as the idea of a sale, it's very quick. It takes your breath away."

VARs are optimistic about the potential sale, saying that it is a chance for BlackBerry to reinvent itself and turn the focus back to product development.

"They don't have a technology problem; they have an image problem. I think being acquired sooner rather than later is the best step for them," said David Felton, founder of BlackBerry VAR Canaan Technology. "There's all this noise about their operations and their money. If you silence the noise and put the spotlight on the product, I think they can make a pretty good comeback."

Felton said that the stigma against the company has made BlackBerry almost inconsequential to his business, but he said he hopes that will change going forward if the company is able to refocus its energy.

"We like the company still, and if people would look at the product, they would see it is far superior to any other product on the market," Felton said.

Kagan said he expects going forward industry watchers will see a smaller, more targeted BlackBerry. Part of the company's paring down has already occurred, such as the 4,500 intended layoffs BlackBerry announced Friday.

"I think going private and getting out of the stock market is a good thing for BlackBerry. Sadly, the big layoffs were probably a necessary pill they had to swallow to make the deal happen," said Robert Gogolen, president of EMF, Inc., a BlackBerry partner based in Keane, N.H.

The consortium is allowed six weeks for due diligence, in which time BlackBerry is allowed to search for alternative offers.

"I think they can succeed. It's just going to be a very different company going forward," Kagan said.